What strategy can Nervous Nelly Comedy Lounge use to mitigate longevity risk?

Implementing a pension buy-in is a viable strategy for mitigating longevity risk. A buy-in occurs when a pension plan purchases a group annuity from an insurer to cover the benefits of its members. This arrangement transfers the longevity risk— the risk that members will outlive their life expectancy and exhaust the fund— to the insurance company.

By doing so, the pension plan secures a guaranteed income stream for its members for the duration of their lives, thereby providing certainty and reducing the financial strain on the plan itself. The insurer takes responsibility for managing the longevity risk, which allows the pension plan to stabilize its liabilities and budget more effectively.

In contrast, options like investing in segregated funds with a complete guarantee or allowing members to choose their own investments do not directly address longevity risk. These strategies focus more on investment returns and asset allocation rather than ensuring that members receive benefits for their entire lifetimes. Additionally, purchasing life insurance for all pension members doesn't directly address longevity risk in the context of a pension plan, as it typically provides a death benefit rather than ensuring continued income.

Therefore, implementing a pension buy-in is the most effective strategy for mitigating longevity risk within the framework of a pension plan.